A committee of independent directors at computer maker Dell says the latest buyout plan from activist investor Carl Icahn is ‘unrealistic’ and faces a potential funding shortfall of $2.9 bn, according to a regulatory filing.
The committee of four independent directors also argues in the SEC filing that the $13.65 per share buyout offer from company founder Michael Dell represents the ‘highest value for Dell’s shareholders’ and ‘provides a significant, certain and immediate premium’.
The statements, filed as part of the proxy materials ahead of the July 18 annual shareholders’ meeting, were made in response to the offer fielded by Icahn last week in which he told investors the company would offer them $14 per share if they helped him foil the founder’s plan for a going-private transaction.
‘Icahn has been inconsistent about per-share cash to shareholders and aggregate cash proceeds,’ the directors say in the filing. They claim that, after accounting for near-term debt payments and other cash needs, Icahn’s offer of $14 a share would equate to $8.15 per share.
The directors also argue that scuttling the takeover by Michael Dell, who has said he plans to steer a private company out of the PC market and into cloud-based and enterprise solutions, would leave the company competing in a deteriorating industry. The founder is making the offer in an alliance with Silver Lake.
Dell’s market share has fallen to 11.1 percent in 2013 from 15 percent in 2008 and is likely to decline further as ‘Asian vendors are becoming increasingly aggressive, competing with operating margins in low single digits.’ The directors also cite growing competition from mobile devices and other areas as a factor in the stock’s decline.
The committee presentation also criticizes Icahn’s cash offer as ‘inconsistent’ and says ‘despite extensive due diligence over many months, Icahn has not secured committed financing for any of these schemes.’
The presentation further cites a series of case studies, including those of Cablevision Systems Corp, Eddie Bauer Holdings, Dynegy and Lear, where shareholders rejected takeover proposals only to see the value of their holdings decline. The presentation concludes that share prices at these firms fell an average of 17.4 percent in the first year after the vote and a total of 54.1 percent in the two years after the rejection.
‘What they are saying is ludicrous and is a normal scare tactic,’ Icahn said in an interview with Bloomberg News after the directors’ presentation.
